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UK housing demand far outstrips supply in March, says Hometrack

British demand for homes far outpaced supply this month, fuelling fears of a housing market bubble, figures out on Monday showed.

Demand grew by 6.6% in March with supply increasing by just 1.9%, according to a monthly national housing survey by residential property analysts Hometrack.

House prices rose in March by 0.6%, although that was less than the 0.7% recorded in February as growth slowed in London and the south-east. Prices rose across half the country in March for the second month in a row.

But the gap between supply and demand remains extended and shows no sign of changing in the short term, it added.

Housing developers have said that while they are building more homes, the industry is set to fail to meet government targets in the foreseeable future.

Critics say the industry's failure to keep pace with demand could drive up prices to unsustainable levels, sparking another price crash and leaving people with homes worth less than they paid for them. Some have urged the government to take action to kick-start supply with large state-backed housing schemes.

On Friday, Land Registry figures showed house prices in England and Wales rising 0.7% in February against January and 5.3% up on February 2013.

Average house price in England and Wales were now £170,000 compared with the peak of £181,658 in November 2007, the data showed.

Howard Archer at IHS Global Insight said house price strength was not yet a serious concern outside London and housing market activity was still not overly strong compared to long-term norms.

But he added: "Nevertheless, the risk of a house price bubble developing is very real as there is appreciable upward momentum in activity and house price strength is becoming more widespread."

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